Global markets across all asset classes experienced heightened volatility as news broke that the U.S. launched a missile attack on Syria in response to the regime’s chemical attack on his own people earlier this week. Global equity markets shot lower and safe-havens, including gold, benefited. The Japanese yen and the Swiss Franc, traditional safe-haven currencies, also found knee-jerk support before reversing most of their gains. The quick reversal shows that markets expect the attack to be an isolated incident. However, the true fallout from the military action is unclear. Russia has already condemned the attacks as act of aggression against a sovereign state. Russia has been propping up the Assad regime in Syria for years and Russian soldiers are currently on the ground in Syria. The attack could also be seen as a warning to North Korea as the U.S. has shown it is willing to act unilaterally against rogue nations. Near-term headline risk and longer-term risk-off potential could spark more volatility.
Despite modestly benefiting from risk aversion trades overnight, the U.S. dollar found resistance this morning following poor jobs numbers. Payrolls rose by only 98K in March, failing to meet an already dismal 180K estimate. Adding insult to injury, last month’s print was also downwardly revised. In addition, wage growth slowed to 2.7% year over year, down from 2.8% in February. Some may see today’s number as an aberration or blame winter weather in March, but nevertheless, the poor reading will pour cold water on future interest rate projections.
Despite the dismal prints, the U.S. dollar has reversed course and is currently gaining across the board.
The Euro initially climbed overnight, benefiting from strong German industrial orders. However, the common currency has since succumb to general dollar strength and is about three-tenths of a percent weaker. German industrial production unexpectedly rose in February, led by the construction sector. Output rose 2.2%, beating expectations of a 0.2% drop.
The British pound was initially immune to Syria-related trades. But the currency came under pressure on reports that U.K. manufacturing and construction dropped. Manufacturing declined 0.1%, construction fell by 1.7% and industrial production dropped 0.7%. All of the prints were below expectations.